' management team, as it does every quarter, held a conference
call with investors and analysts to discuss its
. The nearly hour-long call was filled with insights from
management on the direction that the company is heading in the
future. Here are the five biggest takeaways from that call.
No. 1: The dividend remains a top priority
CEO Ryan Lance ended his prepared remarks on the call by saying,
"Finally, earlier this month, we approved a dividend increase of
5.8%. Giving back capital to our shareholders remains a top
priority, and we believe an attractive dividend is the key part
of our investment offering." With that raise, ConocoPhillips'
dividend yield is 3.61% at current prices. That's a lot higher
than most of its
independent oil and gas
peers; the next-best dividend is
with a yield of 2.9%. Most other independents have dividend
yields around 1%, so when ConocoPhillips says its dividend is a
priority, it really means it.
CEO Ryan Lance. Source: ConocoPhillips.
No. 2: Production growth remains on track
Ever since spinning off its refining arm, ConocoPhillips has
focused on delivering steady production growth. The company's
five-year plan specifically calls for 3%-5% annual production
growth. Despite bumps in the road along the way, the company
remains on target to deliver its stated growth rate. In fact, in
ending his comments on the call, Matt Fox, EVP of Exploration and
Production, said, "The bottom line, is we expect to deliver 3% to
5% production growth this year, with strong momentum going into
2015." Needless to say, production growth remains on track in an
industry that has had trouble delivering production growth in the
No. 3: Stock buybacks are on the back burner
Part of ConocoPhillips' transition to a growth-focused
independent oil and gas company has been to sell low growth
assets and use the proceeds to buy back stock and fund growth
projects. After two years, ConocoPhillips has finally finished
its disposition program. With asset sales complete, one of the
analysts on the call asked if the company was considering any
additional stock buybacks.
CEO Ryan Lance said the company's focus right now is to fund
its investment program to explore and produce oil and gas. He
noted that, "to the extent we fully fund all of our high-quality
investment programs, we'd consider share buybacks at that point
in time. But right now, it's being used to fund our dividend and
our capital program." Bottom line, here, don't expect
ConocoPhillips to buy back any more stock unless it's so cheap
that it is a better investment than exploring for oil and
No. 4: Diversification takes the worry away
ConocoPhillips has several major projects in development, and one
of the analysts on the call wondered if problems at any one
project could impact the company's production growth goals over
the next year or so.
Matt Fox soothed these worries by saying:
No, I think that the range that we've given for both the
third-quarter and the fourth-quarter captures the uncertainty
that we see in the overall portfolio... But one of the
advantages that we have as a diversified company is that... no
single project is going to make a big difference in the overall
scheme of things. And that diversification in the portfolio
helps us to limit the exposure to individual project
It looks like investors can sleep soundly knowing that a big
project delay won't have any noticeable impact on the company's
EVP of E&P Matt Fox. Source: ConocoPhillips.
No. 5: Forget about an MLP
The combination of low interest rates and the North American
energy boom is creating a lot of excitement around
master limited partnerships
. Many of ConocoPhillips' peers, including most recently
, are forming MLPs out of their midstream assets to unlock the
value of those assets. So, of course that makes us wonder when
ConocoPhillips would be forming an MLP out of its midstream
assets. This question was asked on the call as an analysts noted
that the company has been building midstream assets in the Eagle
Ford Shale, which could be packaged into an MLP and
Chief Financial Officer Jeff Sheets, however, threw cold water
on that idea by saying:
When you look at our midstream position overall... going
back in history, most of that midstream position... has then
since gone off course with Phillips 66. So there's not a lot of
midstream assets that are out there that could form the core of
an MLP for us. As we go forward, we are having some midstream
investments in the Eagle Ford and in the Permian. But those are
really not of a size that we feel like we have the critical
mass to be thinking about an MLP, but that's something that
we'll just continue to evaluate as we go through time.
So, basically, investors can forget about an announcement of
an MLP coming from ConocoPhillips. The company simply doesn't
have enough MLP-type assets to make it worth forming an MLP.
Instead, if the company did decide to monetize the assets, it
might simply sell them to an existing MLP. However, right now,
these assets are critical to the company's growth.
The biggest takeaway from ConocoPhillips' call is the fact that
the company's strategic plan remains on track. Its production
growth won't be affected by any major delays, and its dividend
remains its other top priority. Because of that the company
should continue to deliver steady growth and income for investors
over the next few years.
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5 Things ConocoPhillips' Management Wants You to
originally appeared on Fool.com.
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